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July 25, 2013

What Do Ballistic Missiles, Barbara Bush and Alternative Investments Have in Common?

While speaking about graduating Phi Beta Kappa from Wellesley College, Dorothy Weaver (left) mentions (with no hint of airs) the role she played in bringing former first lady Barbara Bush and Russia’s first lady Raisa Gorbachev to the campus for a 1990’s commencement speech.

The invitation drew controversy that was closely watched around the country because many of the female graduates didn’t feel Bush’s individual achievements measured up. Bush, however, waded into the mini-maelstrom, charmingly disarmed the graduates and saved the day.

So how did Weaver, chair of her alma mater's financial committee at the time (a post she held for 17 years) land the A-list speaker?

“Barbara introduced me to my husband,” she responds just as oft-handedly.

While her connections are impressive, her career achievements are more so. The CEO, chairman and co-founder of Collins Capital, an alternative investment firm based in Coral Gables, Fla., is also a former chairman of the Federal Reserve Bank in Miami.

“I sometimes disagree with my brother-in-law, Richard Fisher,” she says, referring to the current (and outspoken) president and CEO of the Federal Reserve Bank of Dallas. It’s gotta be a Texas thing—Weaver is a native—because she doesn’t hold back.

“We’ve been in hedge funds since before they were called hedge funds,” she begins. “What did we call them then? Good managers.”

Advisors, Weaver says, are clear about where they don’t want to be. Identifying where they therefore want to be is the problem.

“Advisors say they want equity-like returns. Oh really, they want returns like equities have recently delivered, meaning zero? They also say they want ‘bond-like risk.’ Like the risks that bonds offered in the spring? It’s code. What they’re really asking for is high single-digit or low double-digit returns with low risk.”

In other words, she adds, they’re may be “danger in safety.” Although equities and bonds are critical in a portfolio, a “third stool is needed—alternative investments.”

“A return enhancer with low risk and reduced volatility? Alternatives fill that role. But it has to be a multimanager, multidiscipline strategy with a differentiated approach. Investors and advisors now have the opportunity to include a hedge fund strategy within the portfolio.”

Weaver explains that she’s been implementing such strategies since 1995, and that the “H” doesn’t stand for “Hail Mary, heroic or the hare from Aesop’s Fable, it stands for hedge, and we’re the slow and steady tortoise in that world.”

She claims that when the market was down 40% during the crisis, Collins alternative strategy was up 9%. She didn’t aim for the gain, rather her focus was on preservation of capital at the time, but the gain nonetheless happened.

“Advisors know the pieces they need in the portfolio, they just might have an issue with execution,” she says. “They want hedge fund expertise with mutual fund ease. That’s where we come in. Right now, advisors are on the cusp of really understanding the difference between alternative strategies and vehicles. Hedge funds can get them there.”

Something else that makes the firm unique is the rocket scientist (literally) they have working on the alternative strategy. In what is rapidly becoming commonplace in Weaver’s explanations, she notes that his former role was manning the defenses in the United Kingdom against a Cold War ballistic missile attack.

“If he made a mistake, millions of people’s lives would be at risk,” she says. “He has that same level of attention and responsibility today, knowing if he messes up, people’s lives—or at least the quality of their lives—is at risk.”